India Op Pert Unities Present As Jon

INDIAN OPPORTUNITIES AND CHALLANGES INNOVATION NORWAY NEW DELHI NOVEMBER 2005

INTRODUCTION TO INDIA

2

INDIA

3

INDIA

4

INDIA - A FACTFILE • India is a Union of States with parliamentary system of Government • Land area: 3.29 million square kilometres • Capital: New Delhi • Population: 1.1 billion Exchange rate: Rs. 45/$ • Foreign Exchange reserves: US$ 160 Billion 5

INDIA - A FACTFILE • Exports: US$ 80 billion in FY04 • Imports: US$ 105 billion FY04 • Climate: mainly tropical with temperature ranging from 100 - 400 C in most parts • Time zone: GMT + 51/2 hours

6

TOTAL GDP AND PPP GDP 2004 Total GDP

Total PPP GDP

7 Source: World Bank: World Development Indicators Database, 15/07/2005

FDI CONFIDENCE INDEX 78%

Highly Educated Workforce Rule of Law

India

Management Talent

73%

27%

73%

27%

70%

Transparency

China

22%

30%

66%

Cultural Barriers

34%

57%

Regulatory Environment

43%

50%

Availability of M&A Targets Consumer Sophistication Competitor Presence

50%

46%

54%

45%

55%

Tax Regime

42%

58%

Quality of Life

41%

59%

41%

59%

40%

60%

39%

61%

Political/Social Stability Economic Reform Financial/Economic Stability

36%

64%

Production/Labor Costs

35%

65%

Government Incentives

34%

66%

Infrastructure

29%

Access to Export Markets

22%

Market Growth Potential Market Size

Source:FDI Confidence Index AT Kearney; Oct 04 Vol 7

71%

6%

78% 94%

8

LOW CONSUMPTION GOODS (KGs) – PER GLOBAL CAPITA LEVEL

DEVELOPED

INDIA

PETROLEUM PRODUCTS

590

2600

100

STEEL

121

415

24

9

OIL PRODUCERS EXPORTERS AND IMPORTERS

10

COAL

11

NET ENERGY IMPORTING COUNTRIES COUNTRY

NET ENERGY IMPORTS (mtoe)

USA

663

JAPAN

437

GERMANY

214

KOREA

177

ITALY

154

FRANCE

137

SPAIN

109

INDIA

100

CHINA

66

Source: IEA, for 2003

12

INDIAN SHIPPING SCENARIO

13

GROWTH PATTERN – INDIAN SHIPPING PERIOD 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 CAGR Last 7 yrs Last 2 yrs

COASTAL SHIPS MGT 234 0.643 250 0.656 273 0.682 316 0.697 336 0.734 425 0.805 436 0.808 458 0.811 10.07% 3.81%

3.37% 0.33%

OVERSEAS SHIPS MGT 244 6.200 240 6.212 240 6.231 230 6.119 224 6.087 191 5.372 203 6.136 228 7.202 -0.96% 9.26%

2.16% 15.79%

INDIAN TOTAL SHIPS MGT 478 6.843 490 6.868 513 6.913 546 6.817 560 6.821 616 6.178 639 6.944 686 8.013 5.30% 5.53%

WORLD MGT 439.0 444.1 449.4 475.2 487.0 503.0 533.3 546.6

2.28% 13.89%

Based on: Tonnage statement, Government of India

14

INDIA’S FOREIGN-GOING FLEET

Gas Carriers 5%

Product Tankers 20%

215 Foreign-Going vessels 82 bulk carriers (38%) 51 crude carriers (24%) 44 product tankers (20%) 11 gas carriers at (5%) and 27 Others (13%).

Others 13%

Crude Oil Carriers 24%

Bulk Carriers 38%

Based on: Tonnage statement, Government of India

15

INDIA’S COASTAL FLEET VESSEL TYPE

NO’S

GT

TUGS

170

46404

OSVs

78

80428

GEN. CARGO VESSELS

65

98187

PASSENGER FERRIES

37

76950

SUPPLY VESSELS

32

90394

PILOT AND SURVEY LAUNCH

22

6639

DREDGERS

21

84634

PRODUCT TANKERS

11

37385

BULK CARRIERS

9

226388

BARGES

3

1220

CRUDE OIL CARRIERS

2

50080

OTHERS

4

9683

TOTAL

454

808392

16

AGE PROFILE Age group

Nos.

DWT

< 5 years

73

1,273,800

5-9 years

88

1,528,560

10-14 years

100

1,737,249

15-19 years

137

2,385,480

>20 years

267

4,655,160

665

11,580,249

Total

17

KEY PLAYERS IN INDIAN SHIPPING Company

Turnover (2004-05) Million Euro

No. of ships owned

DWT

Shipping Corporation of India Ltd. (SCI)

628

83 owned (in addition, 53 ships are managed and manned )

4.62 million (Plus 68,000 DWT of other manned vessels)

The Great Eastern Shipping Co. Ltd.

380

42

3.02 million

Turnover for 2004-05 merged with Great Eastern Shipping

31

43,000 tons

Mercator Shipping

49

13 (Excluding Barges)

Varun Shipping

46

16

0.54 million

Essar Shipping

157

30

1.65 million

The Great Offshore (newly formed through de-merging)

1.34 million (Plus 6,500 tons of barge tonnage)

18

FUTURE PLANS - SHIPOWNERS Company

Vessel types

Future plans

Shipping Corporation of India Ltd. (SCI)

Crude oil Tankers, Product Tankers, Chemical Tankers, Gas Carrier, Bulk Carrier, Liner Ships, OSVs,Passengercum-Cargo Vessels



Expansion, modernisation & diversification of its fleet (US$ 1.0 billion investment approved by Indian Government)  Exploring setting up of Joint Venture companies  One Crude oil Tanker on order list,being built at Hyundai, Korea, delivery scheduled at the end 2005

Essar Shipping

VLCC, Suezmax carriers, Product Tankers, Dry bulk carriers, Mini bulk carriers, Tugs



Focusing on refining & marketing  To cover the entire value chain from oil terminal to international logistic  Development of Vadinar Terminalling Facility with Crude oil tankage cap. of 5.79 mill. Tankage cap. Of 6.81 mill. Barrels.Annual throughput capacity of 200 mill. Barrels  Plans to emphasize more on Integrated coastal trade & transport

19

FUTURE PLANS - SHIPOWNERS The Great Eastern Shipping Co. Ltd.

Crude oil Carrier, Product Carrier, Gas Carrier, Bulk Carrier



Five Product Carriers (Medium Range) expected to be delivered by mid 2007  Embarking upon plans for expansion,modernization & diversification of its fleet

The Great Offshore

PSVs, AHTS, AHT, DSVs, Harbour Tugs, Const.Barges, Drilling Units



Mercator Shipping

Tankers, Bulk Carrier, Barges



Varun Shipping

Tankers, Gas Carriers, Bulk Carrier, AHTS



Takeover of three new AHTSVs and two PSVs  Capitalizing on global opportunity in Exploration & Production sector New takeover from Klaveness Shipping Norway for nine bulk carrier worth $400 m by Dec 2005  Eyeing on 10% of Indian bulk market Replacement of ageing tonnage & selection, training of skilled seafarer  Adding of more vessels  Planning to invest Rs. 1,000 cores in the current financial year  Company with Exmar group of Belgium & IOC bid for LNG Tanker against tender floated by Petronet LNG. If accepted the partners will jointly float a new company in India & operate the LNG tanker on charter for 25 years

20

ANALYSIS OF CURRENT SHIPBUILDING ACTIVITY IN INDIA

21

MAJOR SHIP YARDS IN INDIA 

GOVERNMENT OWNED

3. 4.

COCHIN SHIPYARD LTD., COCHIN HINDUSTAN SHIPYARD, VISHAKAPATNAM



PRIVATELY OWNED

8.

ABG SHIPYARD, SURAT BHARATI SHIPYARD LTD.

9.

22

Large

MARKET SEGEMENTATION AND POSITIONING OF INDIAN YARDS Large Conventional Vessels

?

Large Specialised Vessels CSL

HSL

?

AAGL Alcock Ashdown Gujarat Ltd. AML Alang Marine

Small

AAGL

ABG

CSE AML BSL

Conventional Public Sector

BSL

Bharati Shipyard Ltd.

CSE

Chowgule & Co. Ltd.

CSL

Cochin Shipyard Ltd

DSE

Dempo Shipbuilding & Eng .

HSL

Hindustan Shipy ard Ltd

Specialised Private Sector

Not to scale Size of the circle denotes turnover (2003 -04)

23

TURNOVER FROM SHIPBUILDING Turnover Figures of Major Indian Shipyards (from Shipbuilding) CSL

HSL

ABG

Bharati

Linear (ABG)

Linear (Bharati)

Rs. Millions

4000 3000 2000 1000 0

2000-01

2001-02

2002-03

2003-04

2004-05

CSL

1444

1193

2352

2284

HSL

667

932

472

399

ABG

857

485

2145

2743

2962

Bharati

881

594

611

1217

1926

24

No. of vessels

EXPORTS FROM INDIAN YARDS

45 40 35 30 25 20 15 10 5 0

Export Domestic

2005

2006

2007

25

ORDER BOOK POSITION TONNAGE TYPE

PRIVATE

GOVERNMENT OWNED

DWT

155,660

639,560

CGT

210,540

256,368

26

CURRENT ORDER BOOK BY VESSEL TYPE (AS IN DEC. 2004) 2005* Vessel type

Nos.

2006*

DWT

Nos.

2007*

DWT

Nos.

Tugs

7

9245

5

3876

Bulk Carriers

1

13300

2

60000

Oil barges

1

369

OSVs

2

1530

Ferries

6

3060

Dredgers

1

1050

Bulk Carriers (IV)

11

20750

3

6000

Total

29

49304

10

69876

2005* Vessel type

Nos.

2006*

DWT

Tug

Nos.

DWT

2

60000

2

60000

2007*

DWT

Nos.

DWT

4

5850

4

5750

3

90000

Bulk Carriers

5

4158

3

90000

Tanker (Product)

2

15250

1

10000

OSVs

4

3866

4

4616

1

716

Total

11

23274

12

110466

8

96466

27

OFFSHORE VESSELS INDIA’S OSV FLEET – BY OWNERSHIP Owner ONGC SCI GESCO Essar Garware Others Total

INDIA’S OSV FLEET – BY AGE

Age group (years) < 10 10-15 15-20 20-25 25-30 > 30 Total

Numbers

Average Age (yrs)

32 10 14 2 5 15 78

19.1 20.8 13.5 21 21 20 18.4

No. of vessels 2 3 0 30 24 2 61

% 3.3% 4.9% 0.0% 49.2% 39.3% 3.3%

28

INVESTMENT PLANS - OFFSHORE 

ONGC Year Vessels 2007-2009 MSV OSVs / AHTS Jack-up Rig 2008-2010 OSVs / AHTS

No Investment 01 US$ 600 million 17 02 19 US$ 270 million

•

29

INVESTMENT PLANS - OFFSHORE 

Shipping corporation of India   



Essar Shippping  



To replace its 10 vessels in two phases Company will concentrate more on cargo ships in terms of fleet expansion Cannot go for fleet expansion, unless ONGC gives commitment of hiring SCI vessels on long term charter.

Buying one 2nd hand Tug Planning 3 AHTS with 6000 hp engine

Garware Shipping   

Planning to acquire three PSV at a cost of US$ 62.4 mn MOU signed for delivery of a second-hand PSV Talks with Norwegian Shipyard for two PSVs – scheduled deliveries in Oct-06 & April-07

30

ABG SHIPYARD ABG Shipyard Type

1 2 3 4 5 6 7 8 9 10

DWT

CGT

Current Owner

AHTS

1,500

4,093 Fredriksen Group

AHTS

1,500

4,093 Fredriksen Group

AHTS

1,500

4,093 Fredriksen Group

AHTS

1,500

4,093 Fredriksen Group

Supply

1,300

3,840 ESNAAD

Supply

1,300

3,840 ESNAAD

Supply

1,300

3,840 ESNAAD

AHTS

1,500

4,093 Fredriksen Group

AHTS

1,500

4,093 Fredriksen Group

Diving Spt

1,000

3,293 Vroon B.V.

Total

13,900

39,371

31

BHARATI SHIPYARD Bharati Shipy ard Ty pe DWT

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

CGT

Current Owne r

MPP

6,500

6,359 MK Shipping B.V.

MPP

6,500

6,359 MK Shipping B.V.

MPP

6,500

6,359 MK Shipping B.V.

MPP

6,500

6,359 MK Shipping B.V.

MPP

6,500

6,359 MK Shipping B.V.

MPP

6,500

6,359 MK Shipping B.V.

Products

5,250

4,135 Al Jaber Transport

Ro-Ro/Lo-Lo

5,000

4,733 Nor Lines AS

Ro-Ro/Lo-Lo

5,000

4,733 Nor Lines AS

PSV

2,200

5,450 Groupe Bourbon

PSV

2,200

5,450 Groupe Bourbon

AHTS

1,700

6,240 Halul Offshore

AHTS

1,700

6,240 Halul Offshore

Ro-Ro

5,000

6,540 Sea-Cargo AS

Ro-Ro

5,000

6,540 Sea-Cargo AS

AHTS

2,200

6,560 Great Eastern Shpg.

AHTS

2,200

6,560 Great Eastern Shpg.

AHTS

2,200

7,040 Great Eastern Shpg.

AHTS Total

2,500

81,150

6,560 Great Eastern Shpg.

114,935

32

CHOWGULE SHIPYARD Chowgule Shipy ard Ty pe DWT

1 2 3 4 5 6 7 8 9 10 11 12 13 14

CGT

Current Owner

MPP

4,450

4,047 Apollo Shipping

MPP

4,450

4,047 Apollo Shipping

MPP

4,450

4,047 Apollo Shipping

MPP

3,600

3,835 SKS (Ship) Ltd.

MPP

3,600

3,835 SKS (Ship) Ltd.

MPP

4,450

4,047 Union Transport Plc

MPP

4,450

4,047 Union Transport Plc

MPP

4,450

4,047 Union Transport Plc

MPP

4,450

4,047 Union Transport Plc

MPP

4,450

4,047 Union Transport Plc

MPP

4,450

4,047 Union Transport Plc

MPP

4,450

4,047 Befracht. Schoning

MPP

4,450

4,047 Befracht. Schoning

MPP

4,450

4,047 Befracht. Schoning

Total

60,600

56,234

33

ALCOCK ASHDOWN SHIPYARD Alcock Ashdown Shipyard Type DWT CGT

Current Owner

1 Products 2 Products

3 000

3 774 Gudami International

3 000

3 774 Gudami International

Total

6 000

7 548

34

COCHIN SHIPYARD Cochin Shipyard Type DWT

1 2 3 4 5 6 7 8 9 10

CGT

Current Owner

Bulk

30,000

10,795 Clipper Group

Bulk

30,000

10,795 Clipper Group

Bulk

30,000

10,795 Clipper Group

Bulk

30,000

10,795 Clipper Group

Bulk

30,000

10,795 Clipper Group

Bulk

30,000

10,795 Clipper Group

PSV

3,500

8,672 Fredriksen Group

PSV

3,500

8,672 Fredriksen Group

PSV

3,500

8,672 Fredriksen Group

PSV

3,500

8,672 Fredriksen Group

Total

194,000

99,458

35

HINDUSTAN SHIPYARD Hindustan Shipyard Type DWT

1 2 3 4 5 6 7 8 9 10 11

CGT

Current Owner

Bulk

30,000

10,795 Good Earth Maritime

Bulk

30,000

10,795 Good Earth Maritime

Bulk

30,000

10,795 Good Earth Maritime

Bulk

30,000

10,795 Good Earth Maritime

Bulk

53,000

15,397 Good Earth Maritime

Bulk

53,000

15,397 Good Earth Maritime

Bulk

53,000

15,397 Good Earth Maritime

Bulk

53,000

15,397 Good Earth Maritime

Bulk

53,000

15,397 Good Earth Maritime

Bulk

53,000

15,397 Good Earth Maritime

RoPax Total

1,560

13,800 Shpg. Corp. of India

439,560 149,362

36

DELIVERY SCHEDULES 

For the first time (deliveries scheduled in 2006), the order book for exports has overtaken the domestic orders (in numbers as well as DWT terms).



Even when viewed in terms of numbers, greater number of vessels will be delivered in 2006 to the foreign owners.



Also, the vessels delivered in 2006 will be of a much larger average DWT. This can be inferred from the fact that despite near tripling of DWT in the period 2005 to 2006, the number of vessels have nearly halved.

37

EXPANSION PLAN – COCHIN SHIPYARD Cochin Shipyard: planning to invest around Rs.160 crores (Rs. 1.6 billion) to develop: Open

building space with provision for launching powered by

a hydraulic system; Additional 20-30%

fabrication facilities

increase in the yard’s capacity.

38

EXPANSION PLAN – ABG SHIPYARD 

ABG Shipyard: investing Rs. 3.75 billion for setting up a new shipyard in Dahej, Gujarat. It is expected to be operational by 2006. The new yard will be able to: 

Build vessels up to 300 m length, including Aframax and VLCCs



Adopt state-of-the-art shipbuilding technologies and



Production integration through CAD/CAM & ERP

39

EXPANSION PLAN – BHARATI SHIPYARD 

Bharati Shipyard is investing in expansion and modernization of its Ratnagiri shipyard at an estimated cost of Rs. 650 million. On completion, the yard will: 

Build vessels of a maximum length of 170 m, including Handysize



Have a dry dock of 176 x 33meters instead of wet dock



Raise the capacity of its gantry crane to 120 tons with a span of 50 meters

40

PROPOSED SHIPYARDS 

L&T Shipyard



Cochin Port Trust plans a large shipyard



Pipavav Shipyard



Adani Shipyard

41

GROWTH LIMITATIONS - INDIAN SHIPPING Twin ills 

Endless bureaucracy and



The seductive narcotic of protectionism (C.Horrocks, Intl.Chamber of Shipping).

42

FUTURE DEMAND FOR EQUIPMENT 

Design & consultancy services



Naval architecture and marine engineering services



CAD/CAM software



Design & detailed engineering services



Training



NC Plasma plate cutting machines



Plate and frame bending machines



Pipe bending machines



Goliath cranes



Surface preparation equipment



Paint spraying equipment



Synchro-lifts



Testing and laboratory services



R&D

43

IMPORTED MARINE EQUIPMENT & COMPONENTS: MARKET SIZE 2005-06

2006-07

2007-08

2008-09

2009-10

At current growth rate (10%)

51

56

62

68

75

At 20% growth after 2007-08

51

56

67

81

97

44

PROCUREMENT AND DECISION MAKING PROCESS 

The mechanism for selection and approval of equipment to be installed onboard is specified in the shipbuilding contract.



The contract also provides for substitution by mutual agreement in case the specified make is not readily available.



Often, the owner selects the main equipment. At times, the yard suggests the make and type and the owner approves it.



There is a difference in the way in which equipment selection is undertaken by the public and private sector yards. 45

PROCUREMENT AND DECISION MAKING PROCESS Public sector yards 

Required to go through elaborate tendering process for each vessel



Difficult to standardise since each time, a different supplier may secure the order



Cannot establish long-term relations and obtain attractive discount and credit terms with a group of suppliers because of the tendering process



The decision-making is often slow and payments could be delayed.

Private sector yards 

Quick decisions are taken based on price, credit terms and project delivery schedules



Standardisation and Efficient Supply Chain Management is possible

46

GOVERNMENT POLICIES 

Automatic Approval for investments



Release of foreign exchange



Retention of sales proceeds in foreign exchange



30% subsidy from the government coffers



Foreign Direct Investment



Tonnage tax benefits



Draft National Maritime Development Policy is ready



Freedom to government owned shipping companies 47

CONCLUSIONS

48

SUCCESS STORIES –SUPPORTING HISTORICAL EVIDENCE 

TELECOM



INFORMATION TECHNOLOGY



AUTOMOBILES



AUTO ANCILLARY



BUSINESS PROCESS OUTSOURCING



STEEL MANUFACTURE



PHARMACEUTICALS 49

OUR RECOMMENDATIONS 

LOOK AT THE MARKET IN TERMS OF MEDIUM AND LONG TERM POTENTIAL



TO DO SO IT IS ADVISABLE TO HAVE A PROACTIVE STRATEGY IN PLACE

50

OPTIONS 

HIRE YOUR OWN MARKETING PROFESSIONAL



TIE-UP WITH AN AGENT

51

INNOVATION NORWAY 

ROADSHOW – VISIT TO MAJOR SHIPYARDS IN 2006



INFORMATION SERVICES



RESEARCH



ADVISORY SERVICES

52